Use Cases Foreign Exchange Trading

FX Rates Pricing

All major FX dealers have electronic pricing engines that generate the bids and offers at which they are willing to deal in any particular currency. These engines run 24 hours a day 6.5 days a week. FX pricing is always subject to the credit line of the counterparty since there is no exchange involved. Since FX is the most liquid asset traded in the world, the FX world is almost entirely electronic. The challenge for a messaging infrastructure is to provide a global WAN friendly system that provides extremely low latency that doesn't depend on geographic proximity as the centre of the FX trading liquidity moves with the sun. The standard is dealable streaming prices in the low single digit milliseconds over WANs. That time includes receiving market data, generating the base price, doing internal credit checks in under a few hundred microseconds, and streaming out the price to the client. Since prices are tradable until they are replaced or cancelled, update speed is of critical importance as well. See the diagram below of a typical bank's FX pricing network.

Typical FX Pricing Topology
Figure 1: Typical FX Pricing Topology

Clearly from this diagram, there are areas such as the servers that feed feed prices to Globex and HotSpot that are very performance sensitive. Other areas have lesser performance needs such as connecting to clients via leased lines or the internet where relative performance is important but might be measured in milliseconds rather than microseconds. The overriding concern though for technologists running high frequency trading infrastructures is consistency and reliability. Key to keeping the highly connected topology like the one shown running profitably is to minimize the effects of glitches and failures and rapidly recover when inevitably they do occur. A representative firm in the retail FX space is FX Capital Markets (FXCM).

According to Yuri Miroshnikov, CTO of FXCM, trading volumes on the FXCM systems have been more than doubling every year, and the trend shows no signs of slowing down.

"We knew we needed to stay ahead of the curve by upgrading our systems to a higher performing messaging layer. We started working with 29West in 2005, and had systems in production in 2006. The success of these deployments made it clear we needed to move to 29West Messaging solutions firm wide for all our low-latency messaging needs. We have used a number of other solutions in the past, but the combination of performance, next generation design and world class support made 29West the clear choice. We are committed to providing the best infrastructure and the best platform in the [FX] industry. It was clear that 29West provided the best solution for today as well as our future growth."

An important consideration in FXCM's choosing a messaging solution was the support for Java as well as very low latency persistent message delivery. With 29West's Ultra Messaging for the Enterprise (UME), features like delivery confirmation and durable subscriptions are provided with sub 100 microsecond latencies.

"We were impressed with the focus and expertise 29West brings to the financial markets. Unlike our experiences with large firms who are focused on broad EAI solutions, 29West understood our business needs, worked closely with our team, and delivered exactly what we needed. The production cutover went flawlessly and the performance gains have made us very pleased with the choice of 29West as our [messaging] partner."
- Alexander Ryssiouk, Director of Development, FXCM.

FX electronic trading is a large task that is best addressed by combining cutting edge messaging solutions including streaming messages for quotes, persistent messages for orders, and TCP Fanout for lower speed client connectivity.

29West Generic FX Solution

It is relatively simple to build an extremely resilient, high performance FX trade bus using the direct application-to-application messaging of 29West's unique, UME product. This consists of an application level API library that your firm's application developers will build their applications with as well as the persistent store software that provides persistence in parallel to the normal flow of messages between applications.

In this solution Parallel Persistence® is achieved within each region by using 29West's Reliable Multicast protocol to send messages to all interested subscribers and to all store groups. A typical FX trade might be transacted in London, passed into the trade bus via a Trade Gateway, then forwarded in parallel with one reliable multicast message to a:

  • Deal database/service that contains information on multi-trade deals in London
  • Position keeping systems in both London and Singapore
  • Credit risk engines in London and Singapore
  • Processes that forward the trade to accounting or other reporting functions in both Singapore and London
  • Multiple persistent stores in three regions to ensure the trade gets delivered to every target system even in the case hardware failure, application failure or data center failure
This scenario is shown below:

Example Trade Message Flow
Figure 2: Example Trade Message Flow

29West understands that multicast routing between regions is sometime not enabled by policy. To accommodate such a network policy, Ultra Messaging® Gateways can be utilized at the regional boundaries for the purposes of providing topic based multiplexing from multicast message streams onto a uni-cast message stream to the remote region. The Ultra Messaging® Gateway can also perform topic based filtering ensuring that only the messages that are required to cross regional boundaries are able to do so.

Inter Regional Boundaries
Figure 3: Inter Regional Boundaries

This diagram shows an inter-regional boundary with the 29West Gateway using reliable uni-cast to allow messages to traverse the WAN at the greatest speed possible (i.e., with out back pressure from the TCP protocol).